When it comes to corporate governance, hardly anyone could be blunter than San Antonio investor George Karutz Sr.

How blunt can he get?

How about this: “Directors tend to leave their brains, their balls and their backbone at the boardroom door.”

Karutz, 66, told me during a lunch meeting that he felt compelled to speak out about his views because of his long experience as an investor and as local efforts increase to entice investors to look more at local startup companies.

Why should you listen to what he has to day?

Karutz has spent his career investing in more companies than almost anyone else. It is all he has ever done to make a living. He knows plenty about what happens in boardrooms. “I do in-depth analysis and get to known these companies very well,” he said.

Karutz has invested in about 100 companies through the years, including Taco Cabana, Luby's Cafeterias and Church's Chicken, when they were still headquartered in San Antonio and publicly traded. Those, he said, had good directors who were accessible and sold the companies into private hands at good prices. Currently, he is invested in Seguin's Alamo Group, which also has good directors, he said.

But other companies he has invested in, such as debt-ridden Oklahoma City-based Chesapeake Energy Corp., recently replaced several board members who had failed to know what executives were doing at the company, he said.

Karutz does not sit on company boards. “I don't want to hamper my investment abilities. If you are on a board, you are restricted,” he said.

He has criticized directors, many times to their face, for not having “enough skin in the game,” in other words, for not investing enough of their own money in the company. While some directors buy stock through favorable price options, some companies compensate directors with restricted stock, which basically is free. If the stock declines in value, it still has some value to the directors who own it.

“It's like putting nothing down to buy a house,” Karutz said. “You can walk away from it. If you put 25 percent down on a house, you think differently.”

People should not allow themselves to be appointed to corporate boards unless they understand the industry. Too many have no connection to the industry, and they fail to perform due diligence, to study the competition and the corporation's goals, Karutz said.

Too many directors are unwilling to criticize company management. “They don't want to be seen as a negative guy,” Karutz said. “They don't want to ask, ‘What's the downside?'” when strategy is discussed. Directors often forget they represent shareholders, not management, he added.

How did governance become so bad?

Shareholders are supposed to decide who becomes a director. Technically, they do. But in practice, other directors decide who else joins the board or, in the case of a strong CEO, the CEO does. Karutz called it “cronyism.”

Shareholders should demand more of directors, Karutz said. “Directors should be vetted better” before their appointments,” he said. “Then other directors should assess them better. If they are not doing the job, they should get rid of them,” he said.

Karutz does that as an investor. He said he sells his investments when he believes directors are incompetent or abusive.

Karutz grew up around business. His great-grandfather and grandfather founded San Antonio's successful Friedrich refrigeration and air-conditioning company. He said he saw his stepfather, the late former San Antonio Mayor Charles Becker, preside over a severe decline of the Handy Andy supermarket chain.

“I've seen the best of business practices, and I have seen the worst,” Karutz said.

Karutz offered parting advice to anyone who sits on a corporate or nonprofit board.

“I challenge any board member to look at themselves in the morning in the mirror and ask, ‘Have I contributed anything to this board?'”